Question

Jeff purchases a $37,000 property, depositing $3,000 as earnest money. If Jeff obtains a 75% loan-to-value loan on the property, no additional items are prorated and there are no closing costs to Jeff, how much more cash will Jeff need at the settlement?

Answer 1

Jeff will need $6,250 more cash at the settlement

Explanation:

First the 75% of the home value $37,000:

`0.75\cdot37000=27750`

Therefore, the value not covered by the loan is the difference between the home value and its 75%:

`37000-27750=9250`

Since Jeff has already done a deposit of $3,000 as earnest money, then the cash he will need at the settlement is the difference between the $9,250 and those $3,000 of the deposit:

`9250-3000=6250`

Jeff will need $6,250 more cash at the settlement